Yasser Arafat, the Palestinian leader, has instructed his officials to break off all contact with Israel as part of the growing confrontation over the limited scale of the Israeli withdrawal on the West Bank planned for this week and the building of a Jewish settlement at Har Homa in East Jerusalem.

"Israel is pushing us into a corner, making us despondent," said Mohammed Dahlan, the senior Palestinian police official in Gaza. "The street is heating up and is about to boil."

Israel announced unilaterally last week that it was pulling out of 9 per cent of the West Bank in the first stage of a three-part withdrawal to be concluded by the middle of 1998. Palestinians say they expect to control 30 per cent of the West Bank at this stage and 90 per cent of the rest of it by the time the withdrawal ends.

Benjamin Netanyahu, the Israeli Prime Minister, who is on a visit to Russia, appears to have miscalculated in much the same way he did over the Israeli withdrawal from Hebron last year by assuming Mr Arafat would be grateful for whatever he could get. Instead, the Palestinian leader has evidently decided that he has the international support to demand more.

A sign of anger in the Arab world - and of growing tension between Israel and Jordan - is an angry letter sent by King Hussein to Mr Netanyahu which declares: "You are destroying the peace process and I haven't an ounce of trust in you." In the past King Hussein was the Arab leader most sympathetic to Mr Netanyahu. The Israeli leader replied: "There is no place for this criticism and no place for this tone."

Already there are signs of increasing violence. A 19-year-old soldier at an Israeli settlement near Hebron was stabbed more than 20 times yesterday. Earlier 10 Palestinians were injured by Israeli soldiers as they demonstrated against the construction of a road to be used by settlers, also near Hebron.

Mr Netanyahu is adamant that he will not increase the extent of the Israeli withdrawal above 9 per cent in the first phase. In the Hebron agreement in January the Israeli leader claimed that one of his achievements was to give Israel the right to determine the size of the area from which it would withdraw. The Oslo accords say Israel is to end the occupation of the West Bank.

This ambiguity was always likely to lead to a crisis. Mr Arafat may have decided that it is better, in the aftermath of the United Nations Security Council vote by 14 to one against the building of Har Homa, to force a battle with Mr Netanyahu now, rather than wait. President Bill Clinton said in Washington that the United States veto of the UN resolution should not be interpreted as meaning that the US supported settlements, but he added that the Palestinians would be making a "terrible mistake" if they resorted to violence. Palestinian leaders were angered by Israel's unilateral decisions on the West Bank and on Har Homa. Yasser Abed Rabbo, a negotiator, said after meeting with Yitzhak Mordechai, the Defence Minister: "... the Israelis don't want to talk. They just want to dictate terms."

Israeli analysts are unclear how far Mr Arafat intends to go in bringing relations with Israel to crisis. They fear, however, that the start of construction at Har Homa next weekend may provoke violence - whatever the intentions of the Palestinian leader.